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Nine surprising tips to improve charitable giving

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From page B6 | January 01, 2014 |

Every year around this time, millions of Americans reach into their pockets and give generously to charity. It makes us feel good and it does good. But it doesn’t do as much good as it could.

It shouldn’t be surprising that most people don’t do extensive research to identify the highest performing charities. But what many people don’t realize is how frequently conventional wisdom and intuition lead people in the wrong direction.

This article presents nine important but often overlooked ways to increase the impact of your giving.

Give to three or fewer charities. Make large donations to a small number of groups where you have the most conviction.

Giving smaller donations to many good charities spreads your resources thin, whereas focusing your giving where it matters most will concentrate your funds to those you believe will achieve the greatest results.

Don’t let overhead costs dictate your choice of charities. Nobody wants their donations to be wasted on excessive overhead costs but overcompensating by selecting the charities because they have the lowest overhead costs is a surefire way to give to mediocre charities.

Overhead costs are necessary for most charities to be healthy and productive. Do you really want to give to charities that skimp on things like modern computer systems that perform everyday tasks efficiently, competitive salaries that attract and retain talented staff and evaluations that look for areas to improve their programs? Me neither.

Don’t be fooled by charity rating agencies that give top ratings to those with low overhead without regard to the quality of their programs. There is a role for looking at overhead costs in charity evaluations but only in combination with assessing the effectiveness of their programs.

Don’t limit your giving to just helping people like you. Many people are most generous with charities that help people who have something in common with them; they give to the universities they attended, the churches where they worship, the medical causes that have touched their lives or the homeless shelters in their home town.

This may be a good strategy if your primary goal is to help people like you but it is probably not the best approach if you want to do the most good for the most people. A better approach is to be open to a broader set of causes and charities.

Give to organizations that provide effective solutions cheaply. Many nonprofits actually brag about how inefficient their solutions are and donors often respond.

For example, private universities tell prospective donors how expensive they are when asking for scholarship funds. Hospitals often remind donors how expensive healthcare is. Is spending $250,000 per person for a four-year degree or $7,000 per patient per day really the best use of donor money?

Certainly private universities and hospitals do good work but the fact that their solutions are so expensive lowers the bar for other organizations that might offer cheaper solutions.

I’m not suggesting that all private universities are less worthy of donations than different types of schools or other types of nonprofits but certainly organization with the more expensive solution have a higher burden to prove their efficiency.

Give to people in distant countries. This surprises, and even offends many people, as we still have plenty of problems right here in America.

However, there can be no denying that we are one of the wealthiest countries in the world and many countries have much more desperate problems.

As examples, we have virtually eradicated diseases like malaria and tuberculosis, nearly every American has access to clean drinking water and we have a literacy rate approaching 100 percent. This wasn’t always the case but we solved these problems decades ago.

Nevertheless, many people in other parts of the world still suffer from them. And the solutions are known, effective and cheap — for example, research has proven that it is much cheaper to save lives by distributing mosquito nets in Africa to prevent malaria than to provide chemotherapy to cure cancer.

This issue is not whether donors want to help people in America versus other countries but that giving money to the poorest countries in the world can provide so much more help.

Prefer development over disaster relief. The victims of disasters like earthquakes, tsunamis and hurricanes are among the most needy people in the world. However, it’s important for donors to keep in mind that 19,000 children die every day of preventable causes — mostly a lack of nutrition and basic medical care in poor countries.

While it would be wonderful if there were enough resources to provide all the help that all of these people need, that isn’t the case.

So priorities must be set and tradeoffs must be made. Major disasters often get so much media attention that they receive more donations than can be utilized effectively and it is extremely difficult to help people in those areas because the local roads and other infrastructure is often destroyed.

In contrast, many programs designed to reduce the 19,000 children who die of preventable causes every day are already up and running efficiently and ready to be expanded with more donor funds.

Is it heartless to not contribute to disaster relief efforts? Maybe, but I think it is less shameful than to ignore the daily 19,000.

Prioritize giving to known healthcare solutions over unpromising research. Research has the potential to be very beneficial and charitable giving can often accelerate its progress.

However, not all research is promising. Many people are so inspired to “find a cure” for an illness that has affected their lives, that they collectively give billions of dollars without any notion of whether the research is likely to make a dent in the problem (other than marketing materials from those requesting the donation).

At the same time, there are still known healthcare solutions that have a tremendous impact for very little donor resources.

For example, studies have shown that donors can save a life for around $2,300 by funding mosquito nets to prevent malaria. When comparing giving to proven solutions versus supporting research, donors should try to understand the likelihood of a meaningful discovery as well as whether the most promising research would be funded without you (in which case your donations would make less promising research possible).

With that in mind, compare funding the most promising research instead of implementing known solutions but based on thoughtful comparisons rather than catchy slogans about “finding a cure” or “beating” a disease.

Give to charities that demonstrate proven results. I am continually amazed at how many donors fail to ask charities for evidence that their programs work.

Just look in fundraising material for just about any charity. You’ll often see stories about individuals who benefited from their programs or descriptions of what the charities did but not reliable evidence of results.

A homeless shelter may have a hundred participants in its return-to-work program and can show you a profile of one successful participant but that doesn’t mean the program is very good.

Such weak evidence is one reason why many people — including me — are skeptical of most charities.

New resources are emerging for donors looking for more rigorous resources to assess evidence. Specifically, charity evaluators such as Innovations for Poverty Action and GiveWell are helping donors identify the best ways to allocate their giving.

Think critically. Being an effective donor is about combining your heart and your head to help others. Though many of these tips challenge the norms, that’s exactly what is needed for donors who are passionate about maximizing the good that comes from their giving.

Aristotle summarized the challenge for donors: “To give money away is an easy matter and in anyone’s power. But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man’s power nor an easy matter.”

Eric Friedman is the author of “Reinventing Philanthropy: A Framework for More Effective Giving.” Visit ReinventingPhilanthropy.com for more information.

 

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